Regional Care Organizations on Track to Take Over Medicaid

Jane Ehrhardt

Published: July 7, 2015

Robin Rawls

In January, Alabama Medicaid named eleven organizations as probationary Regional Care Organizations (RCOs). By October of next year, the plan is for these nonprofit RCOs to manage the care of just over 600,000 qualifying Medicaid patients in the state.

Under the emerging revision, Medicaid broke the state into five regions with the possibility of multiple RCOs overseeing each region. Right now, two RCOs have been approved for every region, with one region, Region A in northern Alabama, having three. Medicaid believes all of the probationary RCOs could meet the remaining criteria and become active by the fall of 2016.

“Our mission is to be sure changes in Medicaid lead to better quality care while shifting the risk of managing the monies to the RCOs,” says Robin Rawls, communications director with Alabama Medicaid Agency.

Most of the RCOs reflect a partnership between hospitals and other healthcare businesses from the region. For instance in Region B, which includes Birmingham, the RCO called Alabama Care Plan is comprised of UAB Health Systems, St Vincent’s Health System, and Triton Health Systems, which is the parent company of Viva Health, an insurance carrier for employers statewide.

Companies, organizations and investors are not restricted to participating in only one RCO. Both Viva Health and UAB Hospital are also part of an RCO in Region D, which includes the Montgomery area.

Each RCO can also apply to cover more than one region. Alabama Healthcare Advantage, composed of McKesson/Med3000, WellDyne Rx, and individual investors, has been granted probationary status in all five regions. Viva Health partners in two RCOs along with overseeing the administration of a third. “Taking on a whole state is a big task, but we felt comfortable working with three regions. That was our sweet spot,” says Anna Velasco, Director of Strategy for Viva.

Overseeing multiple regions creates advantages for the RCOs in eliminating redundant set-up and administrative tasks. “Building infrastructure costs the same whether you’re in one or five regions, so there are economies of scale,” Velasco says.

Patients will also benefit from their RCO managing multiple regions, especially those patients living on regional borders. “You might live in a region where the nearest city is in another region. And that’s where you would likely need to see a specialist,” Rawls says.

Ensuring access to enough Medicaid physicians across their region is the next step to qualify as an active RCO. This criterion could present problems for the RCOs. “The state overall has shortages in certain specialties,” Velasco says. “That makes the shortage more acute for RCOs, because not all providers take Medicaid.”

But the RCO arrangement may help solve the specialist shortage by enticing previously reluctant providers to participate in Medicaid. “The services provided by RCOs can help make it easier to work with the Medicaid population,” Velasco says.

Those services help patients overcome obstacles to consistent care which can be frustrating to providers, such as finding transportation to the pharmacy, calling with reminders about appointments, and visiting in the hospital to ensure patients being released understand their medications.

Medicaid providers under RCOs could also see more secure revenue. Right now, physicians accepting Medicaid run the risk of reimbursements being cut mid-year if monies run short. “Physicians don’t like that uncertainty. But the RCOs will have a guaranteed fixed payment, which means we can offer the same security to the providers,” Velasco says. “And there’s the possibility of physicians seeing additional financial rewards for achieving quality measures.”

As a stepping-stone to taking over the care of Medicaid patients, six of the RCOs have been deemed Health Homes this year. “It’s a program that will hopefully create savings for the state while allowing RCOs to get experience with the most difficult Medicaid patients — the ones identified by the state with chronic healthcare needs — before we’re at risk for paying the claims,” Velasco says.

Started April 1, Viva Health’s RCO began Health Home services for 67,000 Medicaid patients in the Birmingham area. They now perform the same support functions as they will as a Medicaid RCO.

The program was piloted around the state several years ago and offers Medicaid providers greater incentives for participating. The state paid providers a flat rate of 50 cents per month for every Medicaid patient. But if the patient is under chronic care and enrolls with Health Home, they get an additional $8 per patient per month.

In addition, the provider receives all the support of an outside organization helping to keep the patient compliant and responsive. “Those providers able to engage with Home Health have been happy about it, and they’re calling us with issues,” Velasco says. “If they’re not able to get a Medicaid patient in to see a certain specialist, they’re now turning to us to get in. It’s very labor intensive for a Medicaid provider. We’re trying to be their provider.”

Over the next year, the RCOs must pass through rigorous approval levels to demonstrate they can handle all aspects of managing Medicaid patient care. The next step falls on October 1 when they must show they have recruited an adequate number of providers to geographically cover their entire region. “They will also have to prove they have the fiscal ability and resources to operate as an RCO, so our recipients suffer no loss in care,” Rawls says.

Medicaid thinks Regional Care Organizations have a strong place in the state’s healthcare future. “RCOs have the ability to do things that the state is not able to do,” Rawls says. “They can be innovative, and we’re looking for opportunities for innovation.”